April 27, 2006


Caption: The goats thought they smelled something.

One of the slicker propaganda moves in the last few years--and the competition was fierce in this department--has been the largely successful campaign to repeal the estate tax at the federal and state levels. Passed by Congress in 1916, and supported by Democratic and Republican administrations until the present one, this tax only effects people who inherit vast amounts of wealth.

The tax does not affect surviving spouses or contributions to charity. Virtually all family farms and small businesses are likewise exempt.

HOW THEY DID IT. Turning a tax that only impacts a small number of very wealthy people into a bogus populist issue was quite a feat. Now we have some idea how it happened. According to a report released April 25 by Public Citizen and United for a Fair Economy, "The multimillion-dollar lobbying effort to repeal the federal estate tax has been aggressively led by 18 super-wealthy families...18 families worth a total of $185.5 billion have financed and coordinated a 10-year effort to repeal the estate tax, a move that would collectively net them a windfall of $71.6 billion."


DEMOCRACY OR ARISTOCRACY? Advocates of this tax began from the now radical assumption that the United States was intended to be a democracy rather than an oligarchy ruled by a tiny aristocracy based on inherited wealth.

This sentiment was perhaps best expressed by Louis Brandeis, a U S Supreme Court justice between 1916 and 1939, who said “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.”

BIPARTISAN SUPPORT. One of the estate tax’s early supporters was progressive Republican President Theodore Roosevelt, who in 1906 stated that “The man of great wealth owes a particular obligation to the State because he derives special advantages from the mere existence of government.” In other words, the rich benefit more than most citizens from public investments and government protection of wealth and property and hence have a responsibility to the public.

On the Democratic side, Theodore’s distant cousin Franklin Delano Roosevelt noted that “Great accumulations of wealth cannot be justified on the basis of personal and family security…Such inherited economic power is as inconsistent with the ideals of this generation as inherited political power was inconsistent with the ideals of the generation which established our government."

Bipartisan support for the estate tax extended beyond the Roosevelt clan. The tax survived the rule of a number of Republican presidents, including Harding, Coolidge, Hoover, Eisenhower, Nixon, Ford, Reagan, and the first President Bush.

Estate tax repeal would basically deprive the country of close to $1 trillion over the next ten years. This is money that could shore up Social Security and/or pay for programs like education, infrastructure, law enforcement, social services, environmental protection, or deficit reduction. Again, as Theodore Roosevelt would argue, these are things that directly or indirectly benefit rich folks too, probably more than the rest of us.

TAX CUTS HURT CHARITABLE GIVING. There are other consequences as well. In 2003, the Brookings Institution reported that repeal of the estate tax “would reduce charitable bequests by between 22 and 37 percent, or between $3.6 billion and $6 billion per year.” This is expected to lead to similar declines in giving during life. “To put this in perspective, a reduction in annual charitable donations in life and at death of $10 billion due to estate tax repeal implies that each year, the nonprofit sector would lose resources equivalent to the total grants currently made by the largest 110 foundations in the United States.”

This means private charities will be even less able to make up the difference from public spending cuts.

COMMON GOOD VS PRIVATE GREED. Significantly, Responsible Wealth, an organization of affluent Americans concerned about the growing wealth gap, opposes estate tax repeal or its equivalent. Their example of placing the public good over their own private gain is an instance of real patriotism and old fashioned civic virtue.



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